Every week a new twist. The legal saga between Elon Musk and the SEC is not lacking in twists, hooks or surprises.
It sometimes feels like being in a courtroom wondering what is the next trick that one and the other side will play.
Tesla (TSLA) – Get Tesla Inc Report CEO seems to enjoy this game. He has just asked federal judge Allison Nathan to end the settlement announced in 2018 with the regulator to end the investigation into the famous Tweetgate affair.
“The SEC’s vendetta against Mr. Musk should be put to a stop,” Alex Spiro, an attorney for Musk asked Nathan in a memorandum filed on Tuesday. “Mr. Musk respectfully requests that this court quash the challenged requests.”
The billionaire and the SEC have been at it since the summer of 2018 and the famous TweetGate affair.
Their relationship has been marked by tension and mistrust over the past four years, but it always comes back to the scandal. Musk still seems to have not digested this resounding affair which forced him to abandon the chairmanship of Tesla and pay a fine of $20 million to the SEC.
A Look at Musk’s SEC Deal
The Tweetgate affair started on Aug. 7, 2018, with this post by Musk on his Twitter account:
“Am considering taking Tesla private at $420. Funding secured.”
The tweet shook Tesla stock. The SEC filed a complaint against Musk.
A settlement was reached and announced on Sept. 29, 2018. It required Musk to step down as Tesla’s chairman. Tesla and Musk agreed to pay $40 million in penalties. Tesla also agreed to have the company’s lawyers preapprove tweets with material information about the company.
Two new independent directors were appointed.
Tesla disclosed in a Feb. 7 regulatory filing that it has received a subpoena from the SEC in last November, requesting information related to the settlement, which mandated that the company vet Musk’s tweets on information that could weigh on the stock.
The SEC also served Musk with a subpoena on Nov. 29 regarding a formal investigation into his Twitter activity.
Musk is not opposed to the entire agreement but to the part that his tweets must be vetted by Tesla’s board of directors before they are published.
“It follows that the consent decree should be terminated, or, at a minimum, modified to remove the prior restraint on Mr. Musk’s free speech,” Spiro wrote to Nathan.
Musk goes so far as to say that he was forced to sign the 2018 deal with the SEC.
“Mr. Musk felt ‘forced to sign the consent decree in 2018 [when] Tesla was a less mature company and the SEC’s action stood to jeopardize the company’s financing. Defending against the SEC’s action through protracted litigation was not in the interests of the company and its shareholders,” Piro argued.
Piro said that the SEC took advantage of the position in which it put Musk in 2018: “Ever since, the SEC has used the consent decree to repeatedly target Mr. Musk’s First Amendment activity for governmental investigation and to thereby chill his expression.”
A New Fight Between Musk and the SEC
Therefore, the billionaire ask the court to terminate the consent decree, “or at the least modify the decree consistent with the First Amendment rights and principles at stake, and monitor the SEC’s further enforcement efforts under it.”
“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?” Musk posted on Twitter on November 6, 2021.
He continued: “I will abide by the results of this poll, whichever way it goes.”
Two weeks later, the SEC issued the subpoena to Tesla.
Since then, the two camps have been clashing again. Musk even suggested on Twitter that he was building a case against the regulator.
“Building a case is exactly what I’ve been doing,” Musk told his more than 76 millions followers on Twitter last February.